Economy adds fewest number of jobs in 7 months
Payroll growth slowed in April as employers added 160,000 jobs, raising concerns that weak economic growth may finally be crimping the U.S. labor market.
The unemployment rate, which is calculated from a different survey, was unchanged at 5%, the Labor Department said Friday, as a fall in the number of Americans employed was offset by a similar decline in the number working and looking for jobs.
Economists expected 200,000 new jobs, according to the median forecast of those surveyed by Bloomberg.
Businesses added 171,000 jobs, led by professional and business services, health care and financial activities. Federal, state and local governments cut 11,000 as the total gains sank to a seven-month low.
Payroll advances for February and March were revised down by 19,000.
Average hourly wages rose 8 cents to $25.53 and are up 2.5% the past year, a bit faster than the just over 2% pace in the recovery and a possible sign that earnings growth is picking up. The Federal Reserve is seeking more rapid wage growth before raising interest rates again.
Economist Paul Ashworth of Capital Economics says April’s weak showing could mark the start of a longer-term slowdown in job growth. Gains of more than 200,000 a month “are simply unsustainable in an economy with a potential economic growth rate of less than 2%,” he wrote in a note to clients.
But Joel Naroff of Naroff Economic Advisors says, “I think it’s a blip.” He notes that the acceleration in wage growth may be another signal that employers are simply struggling to find skilled workers.
And Wells Fargo economist Mark Vitner says the decline in payroll growth largely reflects layoffs by retailers and modest additions in construction after those sectors ramped up hiring early in the year amid unusually warm winter weather. Retailers cut 3,000 jobs while contractors added just 1,000. Professional and business services added a robust 65,000 jobs; health care, 38,000; leisure and hospitality, 22,000; and financial activities, 20,000.
Still, Barclays says the lackluster overall gains will likely dissuade a cautious Fed from raising interest rates again in June. The Fed lifted its benchmark rate in December for the first time in nine years but has held it steady since, citing global weakness, volatile financial markets and the recently sputtering U.S. economy.
There were a few encouraging signs in the report. The average workweek rose to 34.5 hours from 34.4 hours, possibly foreshadowing a pickup in hiring. And the number of part-time workers who prefer full-time jobs fell by 161,000, helping push down a broader measure of unemployment that includes that group, the jobless and discouraged workers who have given up looking to 9.7% from 9.8%.
Average payroll gains had been topping 200,000 a month in 2016 and the past couple of years even as economic growth slowed from a 2%-plus average to 1.4% at an annual rate in the fourth quarter and 0.6% early this year. Solid consumer spending and robust service-sector hiring more than offset a drumbeat of layoffs in the nation’s oil patch and factories – fallout from low oil prices and exports that have been hammered by a sluggish global economy.
In April, mining companies chopped another 8,000 jobs while manufacturers added 4,000.
But Friday's report raises concerns that the service sector may also pull back on hiring. Consumption slowed in the first quarter despite the sturdy job gains, low gasoline prices and better household balance sheets. Payroll processor ADP this week estimated that the private sector added just 156,000 jobs in April.
Other employment indicators, though, have been positive. Initial claims for unemployment insurance, a barometer of layoffs, have hovered near a four-decade low. And a service-sector survey showed a pickup in hiring last month.
